Wednesday, August 31, 2005

Last week the 4th Circuit decided against Jerry Falwell in a case concerning an individual who operated http://www.fallwell.com/ as a gripe site to criticize Falwell's views on certain issues.

In Lamparello v. Falwell, No. 04-2011 (4th Cir. Aug. 24, 2005), the court addressed claims under both the Lanham Act for TM infringement and the Anti-Cybersquatting Act. The parties stipulated that Lamparello never sold any goods or services on his website, but that at one point he had a link to Amazon.com's page offering a book that contained views consistent with Lamparello's and contrary to Falwell's on certain issues.

As to the Lanham Act claim, the Court declined to decide whether, as Lamparello argued, the Lanham Act applies only to "commercial speech" as that term is understood under 1st Amendment law, deciding instead that there was no likelihood of confusion based on the appearance of the Lamparello's web site.

The Court then analyzed Falwell's "initial interest confusion" argument separate from the regular likelihood of confusion analysis. The court sort of pooh-poohed the argument initially, calling it a "relatively new and sporadically applied doctrine" -- sporadically applied? I thought at least half the circuits explicitly accepted it -- noting that the 4th Circuit had never applied it. But then the Court sidestepped an "up or down vote" (to use a buzzword used a lot in certain political contexts these days) on the doctrine, holding that, whether it's a valid legal theory under the Lanham Act or not, it would apply only where the defendant competes with the plaintiff for sales. While I'm usually not a big fan of the 4th Circuit's trademark jurisprudence, this distinction seems to make some sense to me.

Finally, in a long but pretty uninteresting discussion, the 4th Circuit decided that Lamparello didn't meet the "bad faith" standard in the Cybersquatting Act.

It involves the Court's rejection of the plaintiff's reverse passing off claim. The plaintiff alleged that the defendant, which was trying to but hadn't yet been able to produce a knock-off computer table, nevertheless cobbled together a sample table based mostly on its own components, but including the important V-shaped legs feature removed from one of the plaintiff's tables. The plaintiff then used the sample as part of its successful pitch to get the Dallas school system to place a sizeable order for tables.

Judge Easterbrook looked at the Supreme Court's decision in Dastar Corp. v. 20th Century Fox Film Corp., and read it really broadly. Remember, Dastar turned on the meaning of the word "source" in the Lanham Act, and in the specific context of a derivative video work based on an pre-existing work whose copyright had expired -- i.e., a "communicative" product, and one that was presumptively in the public domain. Ignoring these facts, Judge Easterbrook said that Dastar asks only whether the consumer knows who has produced the finished product, regardless of whose components go into it. He rhetorically asked, essentially, whether it's reverse passing off if the table seller doesn't disclose that it got its wood from Oregon Clear Cut Lumberyard, its nuts and bolts from Smith Screw Company, and vinyl molding from Jones Vinyl Corp. Of course the answer is no. Duh.

But this case was different. Oregon Clear Cut and Smith and Jones don't sell tables. They sell components used to make a variety of things, including tables. When a competitor in the table business, however, sees its product being sold under another's mark, that's reverse passing off. And when what is taken is less than the complete product, then most circuits take the position that the question is whether the defendant's product is substantially different from the product the plaintiff sells -- a grey area that will change with each case. In my view it's way too simplistic and wrong, as well as based on an overbroad reading of Dastar, to say that there's no reverse passing off in any case when the customer knows who assembled the product.

Let's take Judge Easterbrook's position to an extreme to see if it holds. Let's say Pepsi decides to change its business model. It decides to buy COKE brand soft drink (good TM usage!) from Sam's Club, pour it into a big vat, add one grain of Domino brand sugar per each 12 ounces, and rebottle under the PEPSI brand. Under Judge Easterbrook's analysis, this is not reverse passing off because Pepsi made the finished product and the consumer is told that. C'mon. No way.

In any event, however, I don't think that Judge Easterbrook needed to address this tricky issue (or to make such a sweeping pronouncement of the death of reverse passing off) -- although he clearly wanted to -- because it seems to me that there was a standing issue "standing" in the way. In a nutshell, there was no mention of any showing that the defendant's use of the plaintiff's component caused it to lose the Dallas sale (so much for the damage claim), and since the Dallas pitch was a one-time, non-repeated thing, there was no standing to ask for an injunction.

Whether I'm right or not on the goofy standing issue, it's clear that the 7th Circuit is now a risky place to bring a reverse passing off claim.

Sunday, August 14, 2005

The 7th Circuit recently issued what seems to be a significant decision about what is necessary to prove secondary meaning in product configuration trade dress case. And it seems to make a survey just about indispensable.

So the plaintiff pointed to the fact that for 7 years, it was the only manufacturer of computer table with V-shaped legs, and during that time it spent over $4 million to promote the tables, and was successful in selling 200,000 tables. Not bad, eh?

Not good enough, said Judge Easterbrook. He reasoned that:"In the end, all Bretford has to go on is the fact that it was the only maker of such tables for eight years and spent more than $4 million to promote sales. If that were enough to permit judgment in its favor, new entry would be curtailed unduly by the risk and expense of trademark litigation, for every introducer of a new design could make the same sort of claim." (Slip op. at 5.)The rest of the panel, in awe of this Jedi master of law and economics, nodded in unanimous agreement.

I think this answers the wrong question. The question shouldn't be whether the plaintiff's assertion of trade dress rights in product configuration curtails new entry in that exact market. Of course it does. And the risk increases the longer the plaintiff is out there alone. But the Supreme Court didn't categorically reject product configuration cases because of this risk. It simply said that in such cases a plaintiff needs to prove secondary meaning. An accepted (if risky) way to prove up secondary meaning is to show a long period of exclusivity in the market, with substantial sales success, along with substantial promotional activity. In this case, those numbers were pretty impressive, and the Court didn't mention any countervailing evidence.

But if these numbers didn't cut it, then, at least in the 7th Circuit, it's going to be virtually impossible for anyone to prove secondary meaning in a product's design with sales & advertising figures alone. And I doubt that the Court that slapped down this evidence is going to be swayed by affidavits of selected consumers ("merely anecdotal," no doubt), no matter how many you can drum up. Plaintiffs are going to have to strongly consider ponying up for a real survey.

(Judge Easterbrook also addressed, in his inimitable style, a weak reverse passing off claim in the case.)

As always, it's fun to read a Judge Easterbrook opinion, but I think this one is wrong.

Tuesday, August 09, 2005

The Ninth Circuit recently issued an opinion in Yellow Cab Co. of Sacramento v. Yellow Cab of Elk Grove, Inc., No. 03-16218 (9th Cir. Aug. 9, 2005), in which it re-affirmed that the owner of an unregistered mark confronted with a challenge to the validity of the mark (such as the genericism defense raised in the case) has the burden to prove that the mark is valid and protectable.

The court performed its genericism analysis by literally asking itself and answering itself the questions "who are you; what are you?" I'm not sure I've ever seen genericism analyzed in a way that sounds like a game kids play at preschool, but, hey, whatever works.

Monday, August 08, 2005

In its recent decision in Lyrick Studios, Inc. v. Big Idea Productions, Inc., No. 03-10837 (Aug. 5, 2005), the 5th Circuit addressed the requirement in section 204(a) of the Copyright Act that copyright transfers be in writing. The general fact pattern is probably pretty common: the copyrighted matter was commercially successful, and the parties acted for a while like there was an agreement, but then the relationship soured and the original creator decided to do business with someone else. So the jilted business partner tries to cobble together a bunch of things that aren't agreements on their own, but, the argument goes, together -- voila! -- they constitute a "writing."

Well, no dice, said the 5th Circuit. The Court not only examined the documents in detail, but it also examined several other other cases involving disputes about whether a sufficient writing existed. So this case is one to keep in mind if you're facing this sort of question.

There's some other interesting stuff in the opinion about what happens to preliminary injunction bonds when the winner of the case keeps changing. (The copyright owner won a preliminary injunction, posted a bond, lost at trial, lost the bond, then won on appeal and wanted the money back.)

Saturday, August 06, 2005

Adding yet another take on when it's OK to apply the Lanham Act to foreign defendants and/or foreign activities, the 1st Circuit recently decided not to follow the kinda seminal decision of the Second Circuit in Vanity Fair Mills v. T. Eaton Co., 234 F.2d 633 (2d Cir. 1956). Back during the days of McCarthyism and "duck-and-cover," Vanity Fair held that courts should assess (without really saying HOW to assess) (1) whether the defendant is a US citizen; (2) whether the defendant's actions have a substantial effect on US commerce; and (3) whether relief would create a conflict with foreign law.

In a long and scholarly opinion in McBee v. Delicia Co., No. 04-2733 (1st Cir. Aug. 2, 2005) (click on link, click "opinions", type in the case number "04-2733", and click "submit search"), the 1st Circuit decided that the Vanity Fair factors needed to be "disaggregated." It thought that the first Vanity Fair factor (whether the defendant is a US citizen), should be the preliminary inquiry. The 1st Circuit suggested that the answer to that question would have an impact upon how much of an effect the defendant's foreign activities would be required to have on US commerce (US citizen, less; foreigner, more). (The court also briefly noted that US activities of foreign defendants are automatically within the subject matter jurisdiction of US courts over Lanham Act claims).

Because the defendant in the case was foreign company, and the activities at issue (with a minor exception I won't tell you about) were purely foreign activities, the 1st Circuit then went on to put a finer point on how much of an effect on US commerce is required for subject matter jurisdiction over such foreign activities of foreign defendants. Looking for guidance more from recent Supreme Court antitrust decisions than from the Supreme Court's much older Bulova Watch Lanham Act decision, the 1st Circuit decided that there has to be "a substantial effect on United States commerce" -- which, of course is the second Vanity Fair factor. The court said this test needs to be applied with an eye toward the dual goals of the Lanham Act: protecting US consumers from being confused, and protecting the goodwill of trademark owners in their marks.The 1st Circuit then "disaggregated" the third Vanity Fair factor (comity with foreign law), saying that issue wasn't a question of subject matter jurisdiction, but rather was a question of whether that jurisdiction, if it exists, ought to be exercised.

Applying the new test, the 1st Circuit said there wasn't subject matter jurisdiction over the plaintiff's claim concerning the defendant's Japanese language website because few Americans can read Japanese and there wasn't any evidence of Americans going to the website and being confused. Nor was there jurisdiction over the plaintiff's claim concerning the Japanese company's sales in Japan because there was virtually no evidence that Americans either were exposed to and confused by the defendant's mark in Japan or that the defendant's goods sold in Japan were making their way back into the US in substantial amounts.

About Me

I am an IP lawyer in Houston, and have been practicing law about 19 years. I work more on the trademark side, though I have litigated several patent and copyright cases as well.

Although I discuss court decisions on this site, this blog does not constitute legal advice. It's a fun hobby. One more thing. Anyone reading this does not, as a result of reading, or publishing a comment on, this blog, become my client. In contrast, my readers and commenters (if any) are just part of our Founding Fathers' grand and glorious vision of free speech. Very public speech.